Inabox share price slashed in half after disappointing Hostworks acquisition

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Inabox share price slashed in half after disappointing Hostworks acquisition

Inabox's share price has fallen by nearly half after the company announced that its $7 million acquisition of Hostworks had not gone as planned.

Inabox's shares were trading at $1.00 on Tuesday 7 November, when the company halted trading pending the Hostworks announcement.

Shares fell 48 percent following the announcement, closing at 52 cents each by the end of trading on Thursday 9 November.

Inabox acquired Hostworks in February this year, expecting the hosted cloud provider to contribute $21.8 million in revenue and $3.5 million in earnings in the 2018 financial year.

However, Inabox revealed that Hostworks would contribute just $15 million with negligible earnings and an overall net loss.

The company pinned the blame on a small number of enterprise customers rationalising their services, and another three enterprise customers that moved their services away.

As a result, Inabox will implement a "cost-reduction program" in order to save $2 million, and focus on high-margin revenue streams.

Inabox said the outlook for Hostworks was "extremely disappointing", but now expects the business to make a meaningful contribution to earnings by FY19.

The company now expects revenue for the first half of FY18 in excess of $50 million with earnings in excess of $2 million, but anticipates recording a net loss.

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